Ozzie renewables costs have halved in 5 years

I constantly encounter people who deny that renewables are the cheapest source of new power.  "We will have to live in caves", they moan.  "It means 'lights out'," they grumble.  "Our civilisation will never be able to survive with 100% renewables", they shout.

So it's nice to get the facts from an electricity company's chief executive:

Source: Origin Energy Presentation to shareholders and analysts.
Note (1): Origin and publicly released 3rd party data

The chart comes from Origin Energy's results presentation two days ago.  It shows bundled PPA (power purchase agreements) for wind and solar PV.

The average cost in 2012 was A$132.50/MWh.  This year the average is A$67.5.   They've halved in just 5 years.  Halved.

Origin Energy is, like AGL, a large generator and retailer ("gentailer") of electricity.   AGL estimates the costs of new brown coal power stations at $100/MWh,  and new black coal power stations at $110/MWh, and stated that its cost of existing production from its fleet of black- and brown-coal power stations at A$37/MWh.  Origin stated that "renewables are the lowest cost new-build generation today".  Which is pretty much what AGL has been saying too.

There is a key follow-through:  if renewables costs halve again in the next 5 years or 6 or 7 years (and they most probably will), this means renewables will then be cheaper than existing coal power stations never mind new ones. It's worse than that, though, for coal power stations.  Once you have built a wind or solar farm you might as well use it as much as possible, since they have (close to) zero marginal costs (no fuel and minimal maintenance.) Which means that quite often old coal power stations will be competing at the margin with electricity which is virtually free.  But coal power stations can't ramp supply up or down in response to movements in supply and demand or in wholesale prices.  They can't just stop operating for a couple of hours or so while renewable electricity is free and they're losing money.  And that is a recipe for financial disaster in the longer-term.  

Inevitably, the plunge in the costs of renewables and the simultaneous rise in their penetration into the grid will accelerate the closure of superannuated coal-fired power stations.  Probably much faster than most analysts now expect.  This local dynamic surely reflects the global picture too.

What about the famous "variability" of renewables?  I've talked a lot about how little storage is actually needed to provide stability to the grid, especially if supply comes from different technologies (wind, solar, CSP, hydro, biomass) spread over different geographies, here and here and here.   South Australia's decision to build a CSP plant at Port Augusta, as well as its decision to build the world's largest battery bank shows what's likely to be replicated elsewhere in Australia as well as overseas.

The Port Augusta CSP plant has a PPA of A$75/MWh, materially below the cost of new coal.   Another three CSP plants (with a total cost of under A$2 billion) would by themselves take South Australia's renewables to 100% of total supply and would provide enough storage (36% of demand for 8 hours) to do it without compromising reliability even if all the rest came from wind and solar, and even if SA lost the interconnectors with Victoria.

 Again, what is happening here in Oz is symptomatic of what is happening globally: rapidly falling renewables prices; dirt cheap CSP; mega battery banks; inevitable closure of coal power stations; and a rapid greening of the grid.

The moral remains: yes we can.